Washington Extra – Action or inaction

Congress returns next week and will decide by action or inaction whether the federal government shuts down.

The White House sounded a note of optimism (which at this point is the only way to go — best to save the podium pounding for when it gets down to the wire).

“All of us agree that a government shutdown would be bad for the economy,” White House spokesman Jay Carney said. “We believe that a compromise can be reached. But I’m not going to speculate on a position, what position we may or may not hold down the road.”

True, nobody really wants the government to shut down. So a compromise is likely.

One indicator to watch to see whether it is close to a resolution: Lawmakers behind closed doors sending out for pizza around 9 p.m.

On the other coast, actors hoping for an Oscar may want to send something tastier than pizza to Heidi, the cross-eyed opossum in Germany that will try to predict the winner.

Here are our top stories from Washington today…

US to impose sanctions on Libya, cuts ties

The United States is imposing sanctions and cutting diplomatic ties with Libya as Muammar Gaddafi’s security forces stepped up efforts to crush a widening revolt against his rule. White House spokesman Jay Carney said the United States was suspending embassy operations in Tripoli and would withdraw all staff. Washington was also moving ahead with unilateral sanctions, which would be coordinated with allies and others. Carney said Gaddafi’s legitimacy had been “reduced to zero” and he had lost the confidence of the Libyan people.

President Obama is treading carefully through the crisis in Libya and trying to avoid inflaming a situation that has repercussions for the economy and, perhaps, his re-election. Part of his caution is driven by the need to ensure Americans cannot be taken hostage, a problem that may have been on the verge of being solved on Friday when a ferry carrying hundreds of Americans sailed for Malta. But he also does not want any moves that could further rattle oil markets and contribute to a steady rise in gasoline prices.

Secretary of State Hillary Clinton will try to rally support against Libyan leader Muammar Gaddafi on Monday at the U.N. Human Rights Council, a group Washington once dismissed as toothless. Clinton’s one-day trip will allow her to consult European and other foreign ministers as the United States examines options including a “no-fly” zone to try to stop Gaddafi’s violent suppression of anti-government protests.

Europe’s EADS is unlikely to drag out a battle for a huge Air Force tanker deal because what counts now is keeping a foothold inside the world’s largest arms market as it tries to be a global player. Newly admitted to the club of companies allowed to bid for such classified work, EADS officials see a glimmer of hope in defeat as they cling to an ambitious goal of generating $10 billion in U.S. sales beyond core Airbus jetliner orders. Analysts say the defeat will increase pressure on the cash-rich company to make good on a pledge to boost its U.S. presence through acquisitions.

For more of this analysis by Tim Hepher and Andrea Shalal-Esa, read here.

Republicans raise pressure on spending cuts

Republicans in the House of Representatives called a government shutdown “unacceptable” but raised the pressure on President Obama and his fellow Democrats to go along with deep spending cuts this year. Republicans say any short-term funding for government operations must include deep savings. “We don’t want to shut the government down. This is not an acceptable or a responsible option for any of us … but we want to see spending cuts,” House Majority Leader Eric Cantor told reporters.

Consumer confidence hit a three-year high in February, suggesting the economy remained on a solid footing despite soaring gasoline prices. The rise in sentiment was a hopeful sign for the economic recovery after the government said on Friday that growth in the fourth quarter was not as robust as it previously estimated. “Consumers do appear to be taking the rise in gasoline and food prices in stride, which is very encouraging,” said one analyst.

Higher oil prices should have a limited impact on the world economy if prices stay at current levels, the IMF said. “The increase by some $10 per barrel since mid-January has reflected increased oil supply risks due to events in the Middle East and North Africa, but current market pricing suggests that this will be mostly a temporary price shock,” an IMF spokesman told Reuters.

Senate Finance Committee Chairman Max Baucus urged the United States and Colombia to quickly craft a plan to resolve concerns about workers rights and anti-union violence that have long blocked approval of a free trade pact. “In the coming days and weeks, the United States and Colombia should develop a specific plan that builds on the tremendous progress to date in strengthening labor rights and prosecuting labor violence,” he said.

States, local governments and public pension funds across the United States are objecting to a proposal by securities regulators that they say could kill volunteer participation on local boards by imposing burdensome requirements. The plan by the SEC would implement a key provision in the Dodd-Frank financial law that for the first time empowers the agency to oversee advisers who offer financial advice to cities, counties and other municipal entities that float public debt or manage public money.

Health regulators want more data on Protalix Biotherapeutics and Pfizer’s experimental drug for Gaucher disease before deciding whether to approve the therapy for patients with the rare genetic disorder. News of the delay sent Protalix shares tumbling more than 27 percent. It also spells some uncertainty for the $2 billion Gaucher market, which has been dogged by shortages of the leading therapy – Genzyme’s Cerezyme.

Germany’s superstar cross-eyed opossum Heidi will appear in Hollywood as a plush toy in celebrity “goodie bags” at the Academy Awards. German toymaker Koesener struck a deal at a recent toy fair to get its toy of the white-haired marsupial into gift bags at the Oscars. “My wish is that one of the celebrities will hold the toy up to the camera, but we’ll see if that happens,” Helmut Schache, who runs the century-old firm with his daughter, told Reuters.